Variations and indulgence clauses — avoiding inadvertent release of guarantees

The law of guarantees is complex and, in the heat of a commercial deal, it is all too easy to inadvertently release a surety to the detriment of yourself or your client. What are the key principles of which all transacting parties should be aware, and how can you get a current deal done without discharging an underlying liability?

It might seem trite to say, but a guarantor’s liability is contingent upon the underlying obligations it has guaranteed. If those underlying obligations are altered, the guarantor can be released. When primary contracting parties want to move forward with their commercial objectives, all too often contractual terms are tweaked, payments or loan facilities are changed, commercial concessions or practical arrangements are made, and guarantees are therefore inadvertently discharged. The law in this area is full of subtleties and it is difficult to draw a clear line as to the circumstances in which changing commercial deals can proceed safely, and those in which guarantors will be released. In the wake of a Court of Appeal decision on the topic, it is helpful to review the law and the potential pitfalls…

If you are registered and logged in to the site, click on the link below to read the rest of the Walker Morris briefing. If not, please register or sign in with your details below.

 

Sign in or Register to continue reading this article

Sign in

Register

It's quick, easy and free!

It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.

Register now

Why register to The Lawyer

 

Industry insight

In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.

 

Market intelligence

Identify the major players and business opportunities within a particular region through our series of free, special reports.

 

Email newsletters

Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.

More relevant to you

To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.

Briefings from Walker Morris

View more briefings from Walker Morris

Analysis from The Lawyer

View more analysis from The Lawyer

Overview

Kings Court
12 King Street
Leeds
LS1 2HL
UK
http://www.walkermorris.co.uk

Turnover (£m): 42.50
No. of lawyers: 188